Construction conversation with Nick Innes-Jones - Sector insights and outlook

Many look for signs of growth in the construction sector as a lead indicator for potential wider economic recovery. So where is New Zealand’s construction sector at right now? We sat down with Nick Innes-Jones, BDO Construction Sector Leader, to discuss current sector sentiment, the outlook for 2026 and practical tips for construction business leaders.

 

Q. What is the current sentiment among construction business leaders nationally?

A. Nick: “BDO’s most recent Business Performance Index (BPI) released in October, shows positivity regarding overall business performance among construction business leaders remains low and unchanged since the first half of 2025. 

However, diving a little deeper into sub-sectors and geographies, it remains a mixed bag for construction business leaders right now – consistent with the picture shared in our 2025 BDO Construction Sector Report.

Our July report showed that civil and infrastructure leaders appear best placed. Auckland has been hit by a pronounced slowdown in residential activity and reduced pipeline of commercial projects, leading to more concern here about forward work and cash flow. These issues are echoed across the rest of the North Island, meanwhile Canterbury has witnessed more construction activity than in 2024.”

Q. The July report highlighted that just 45% of construction business leaders felt positive about their business growth, making this a priority (top five) issue for the first time in our survey. Do you sense this is still a key focus?

A. Nick: “With tough economic conditions and an unsteady forward work position, achieving growth has been challenging for much of the construction sector recently - but there are signs of foundations being laid for future growth. The Government’s new Investment Boost initiative will likely incentivise some businesses to invest in productive assets to grow profitability, although strong pipelines of forward work remain essential for businesses to grow.”

Q. Much has been made of the relative strength of residential construction in Canterbury and the Southern Lakes areas. But what’s the picture for construction in our largest urban centre currently?

A. Nick: “Auckland’s construction sector has proven to be resilient in recent years, and business leaders working on civil and infrastructure projects are in a reasonably positive place right now. There’s more tendering going on in the commercial subsector compared to the second half of 2024, while times are a bit tougher in the residential space. Hopefully as economic conditions improve over the next year, we’ll seen an improvement across the board. Staffing will likely become a bigger issue as the market recovers and more projects get signed up, so businesses should take measures now to attract and retain the skilled workers they’ll need in the future.”

Q. Are there any promising signs ahead for the construction sector in 2026?

A. Nick: “Looking ahead, the recent drop in the OCR and the Government’s Investment Boost initiative should encourage property owners to actually commence projects that have been sitting on hold awaiting signs of improving economic conditions. Construction business leaders will continue to monitor inflation levels, margins, sector risks and resource availability as the spending from the thriving agriculture sectors filters into the larger centres.”

Q. You can’t control the economy, but you can control how you prepare for - and react to - changing market conditions. What practical tips can you share, based on your observations from working with construction business leaders, to help them navigate current market challenges and opportunities?

A. Nick: “Cash flow is king and always a great place to start. Reduce unnecessary expenditure (both operational and capital expenditure) to have the ability to pay bills on time.  

It’s also valuable to look at how you can improve your financing structures by engaging with existing and/or new financiers. You may be able to take advantage of better debt and capital structure options available in the market.

Monitoring your sales pipeline, margins and forward cash flow is important too. If your forward work reduces, consider the adjustments you can make to ensure there’s no strain on cash flow. 

Q. And given business growth is now a priority concern, what tips would you suggest here?

A. Nick: “Construction business leaders should always be looking to work on new client relationships and opportunities. It can be easy to fall into a niche, but exploring different projects and sectors could open up new revenue streams.

Staffing is obviously another key area to consider. It may be necessary to make staffing cuts to remain competitive, but don’t cut your business so much you cut muscle. It’s important to have the right staff to be ready for an improvement later in the year.

And lastly, it’s important to maximise any downtime to work on your business so that you’re better prepared to capitalise on opportunities as the market recovers. This includes securing available talent, working on systems and processes, and developing appropriate governance structures.”

For further insights and support, please reach out to our BDO Construction Sector team here or your BDO adviser.